Which groups of accounts are closed at the end of the accounting year?
> Why is it important to disaggregate ROA into profit margin (PM) and asset turnover (AD?
> Jackie Hardy, CPA, has a brother, Ted. in the retail clothing business. Ted ran the business as its sole owner for IO years. During this I 0-year period. Jackie helped Ted with various accounting matters. For example, Jackie designed the accounting syste
> Explain in general terms the concept of return on investment. Why is this concept important in the analysis of financial performance?
> Paula Seale is negotiating the purchase of an extermination firm called Total Pest Control. Seale has been employed by a national pest control service and knows the technical side of the business. However, she knows little about accounting data and finan
> In determining net cash flow from operating activities using the indirect method, why must we add depreciation back to net income? Give an example of another item that is added back to net income under the indirect method.
> Data from the financial statements of JetBlue Airways and Southwest Airlines are presented below. REQUIRED a. Compute the return on equity ratio for JetBlue and Southwest for 2017. Which company earned the higher return for its shareholders? b. Compute t
> What is the difference between the direct method and the indirect method of presenting net cash flow from operating activities?
> Data from the financial statements of The Gap, Inc., and Nordstrom, Inc., are presented below. REQUIRED a. Compute the return on equity ratio for The Gap and Nordstrom for 2017. Which company earned the higher return for its shareholders? b. Compute the
> Why is a statement of cash flows a useful financial statement?
> In 2019, Cart Inc. adopted a plan to accumulate funds for environmental remediation beginning July 2, 2024 at an estimated cost of $20 million. Cart plans to make five equal annual payments into a fund earning 6% interest compounded annually. The first d
> Starbucks Corporation reported the following data in its 2018 and 2017 10-K reports. REQUIRED a. Prepare income statements for Starbucks for the years ended September 30, 2018, and October 1, 2017. Use the format illustrated in Exhibit 1.8. b. Compute St
> Why are noncash investing and financing transactions disclosed as supplemental information to a statement of cash flows?
> DowDuPont Inc. provides the following footnote disclosures in its 10-K report relating to its pension plans. REQUIRED a. How much pension expense (revenue) does Dow DuPont report in its 2018 income statement? b. Dow DuPont reports a $2,846 million expect
> Traverse Company acquired a $3,000,000 building by issuing $3,000,000 worth of bonds payable. In terms of cash flow reporting, what type of transaction is this? What special disclosure requirements apply to a transaction of this type?
> Record the effect of each of the following independent transactions using the financial statements effects template provided. Confirm that Assets = Liabilities + Equity for each transaction.
> In which of the three activity categories of a statement of cash flows would each of the following items appear? Indicate for each item whether it represents a cash inflow or a cash outflow: a. Cash purchase of equipment. b. Cash collection on loans. c.
> In the last quarter of 2014, DreamWorks Animation SKG Inc. recorded a loss. Part of this loss was due to impairment charges. In its annual report the company stated: We are required to amortize capitalized production costs over the expected revenue strea
> What are the three major types of activities classified on a statement of cash flows? Give an example of a cash inflow and a cash outflow in each classification.
> The following information is taken from the March 31, 2018 annual report of Take-Two Interactive Software, Inc., a maker and distributor of video games. All amounts are in thousands of U.S. dollars. Information from the Management Discussion, Balance She
> Why are cash equivalents included with cash in a statement of cash flows?
> Sandy Nguyen just graduated from college and has $40,000 in student loans. The loans bear interest at a rate of 8% and require quarterly payments. a. What amount should Sandy pay each quarter if she wishes to pay off her student loans in six years? b. Sa
> Return on a company's net operating assets is commonly used to evaluate financial performance. One way to increase performance is to focus on operating assets. REQUIRED Indicate how this might be done in relation to the following asset categories. Indica
> What separate disclosures are required for a company that reports a statement of cash flows using the indirect method?
> General Mills, Inc. is a global consumer foods company. The firm manufactures and sells a wide range of branded products and is a major supplier to the foodservice and baking industries. The company's core product areas are ready-to-eat cereal, super-pre
> Describe the accounting for a convertible bond. Would this accounting ever result in the recognition of a gain in the income statement'!
> What is a stock option vesting period? How does the vesting period affect the recognition of compensation expense for stock options?
> What items are typically reported under the stockholders' equity category of other comprehensive income (OCI)?
> What information is reported in a statement of stockholders equity'?
> Employee stock options have a potentially dilutive effect on earnings per share (EPS) that is recognized in the diluted EPS computation. What can companies do to offset these dilutive effects and how might this action affect the balance sheet?
> What is the difference between the accounting for a small stock dividend and the accounting for a large stock dividend?
> Brownlee Company borrowed money by issuing a 20-year mortgage note payable. The note will be repaid in equal monthly installments. The interest expense component of each payment decreases with each payment. Why?
> On April 30, 2019. one year before maturity. Weber Company retired $200.000 of 9% bonds payable at 101 . The book value of the bonds on April 30 was $197,600. Bon d interest was last paid on April 30 , 2019. What is the gain or loss on the retirement of
> How should premium and discount on bonds payable be presented in the balance sheet?
> A firm uses the indirect method. Using the following information, what is its net cash flow from operating activities?
> If the effective interest amortization method is used for bonds payable how does the periodic interest expense change over the life of the bonds when they are issued (a) at a discount and (b) at a premium?
> Regardless of whether premium or discount is involved. what generalization can be made about the change in the book value of bonds payable during the period in which they are outstanding?
> Identify at least two factors that limit the usefulness of ratio analysis.
> How is the operating cash flow to capital expenditures ratio calculated? Explain its use.
> How is the operating cash flow to current liabilities ratio calculated? Explain its use.
> What separate disclosures are required for a company that reports a statement of cash flows using the direct method?
> Rusk Company sold equipment for $5,100 cash that had cost $35,000 and had $29,000 of accumulated depreciation. How is this event reported in a statement of cash flows using the direct method?
> A firm reports $43,000 advertising expense in its income statement. If beginning and ending prepaid advertising are $6,000 and $7,600, respectively, what is the amount of cash paid for advertising?
> A firm reports $86,000 wages expense in its income statement. If beginning and ending wages payable are $3,900 and $2,800, respectively, what is the amount of cash paid to employees?
> A firm is converting its accrual revenues to corresponding cash amounts using the direct method. Sales on the income statement are $925,000. Beginning and ending accounts receivable on the balance sheet are $58,000 and $44,000, respectively. What is the
> Bai man Corporation commences operations at the beginning of January. It provides its services on credit and bills its customers $30,000 for January sales to be collected in February. Its employees also earn January wages of $12,000 that are not paid unt
> If a business had a net loss for the year, under what circumstances would the statement of cash flows show a positive net cash flow from operating activities?
> Dehning Corporation is an international manufacturer of films and industrial identification products. Included among its prepaid expenses is an account titled Prepaid Catalog Costs; in recent years, this account's size has ranged between $2.500.000 and $
> What is the purpose of a post-closing trial balance? Which of the following accounts should not appear in the post-closing trial balance: Cash; Unearned Revenue; Prepaid Rent; Depreciation Expense; Utilities Payable; Supplies Expense; and Retained Earnin
> What are the two major steps in the closing process?
> The Bayou Company earns interest amounting to $360 per month on its investments. The company receives the interest every six months, on December 31 and June 30. Monthly financial statements are prepared. What adjusting entry should be made on January 3 I
> Globe Travel Agency pays an employee $475 in wages each Friday for the live-day workweek ending on that day. The last Friday of January falls on January 27. What adjusting entry should he made on January 31, the fiscal year-end?
> The publisher of l111ema1io11af View, a monthly magazine, received two-year subscriptions totaling $9,720 on January I. (a) What entry should be made to record the receipt of the $9,720? (b) What entry should be made at the end of January before financi
> At the beginning of January, the first month of the accounting year. the supplies account had a debit balance of $825. During January, purchases of $260 worth of supplies were debited to the account. Although only $630 of supplies were still available at
> On December 31, 2018, Miller Company had $700,000 in total assets and owed $220,000 to creditors. If this corporation's common stock totaled $300,000, what amount of retained earnings is reported on its December 3 1, 2018, balance sheet?
> Vista Company sold for $98,000 cash land originally costing $70,000. The company recorded a gain on the sale of $28,000. How is this event reported in a statement of cash flows using the indirect method?
> What are the two fundamental qualitative characteristics and the six enhancing qualitative characteristics of accounting information? Explain how each characteristic improves the quality of accounting disclosures.
> What are the objectives of financial accounting? Which of the financial statements satisfies each of these objectives?
> What is the primary function of the auditor? To what does the auditor attest in its opinion'!
> What are International Financial Reporting Standards (IFRS)? Why are IFRS needed? What potential issues can you see with requiring all public companies to prepare financial statements using IFRS?
> What are generally accepted accounting principles and what organization presently establishes them?
> Business decision makers external to the company increasingly demand more financial information on business activities of companies. Discuss the reasons why companies have traditionally opposed the efforts of regulatory agencies like the SEC to require m
> The current asset section of the 2017 and 2016 fiscal year end balance sheets of The Kroger Co. are presented in the accompanying table: In addition, Kroger provides the following footnote describing its inventory accounting policy (assume the following
> Caterpillar Inc., consists of two business units: the manufacturing company (parent corporation) and a wholly owned finance subsidiary. These two units are consolidated in Caterpillar's 2018 10-K report. Following is a supplemental disclosure that Caterp
> Columbia Company began operations in 20 19 and by year-end (December 31) had made six bond investments. Year-end information on these bond investment follows. REQUIRED a. At what total amount will the trading bond investments be reported in the December
> Vireo Manufacturing Corp. provided the following note in its annual report for the year ended January 31, 2011: On January 31, 2011, the Company elected to change its costing method for the material component of raw materials, work in process, and finish
> On January 1, 2016, Gem Company purchased for $392,000 cash a 70% stock interest in Alpine, Inc., which then had common stock of $420,000 and retained earnings of $ 140,000. Balance sheets of the two companies immediately after the acquisition were as fo
> Following is a portion of the investments footnote 8 from MetLife lnc.'s 2017 I 0-K report. Investment earnings are a crucial component of the financial performance of insurance companies such as MetLife, and investments comprise a large part of its asse
> The 2017 and 2018 statements of stockholders' equity for Alphabet Inc. are presented below along with portions on Notes LO and 12 relating to stockholders' equity and equity-based compensation. Note 10: Stockholders' Equity Convertible Preferred Stock Ou
> Following is the stockholders' equity section of the balance sheet for The Procter & Gamble Company along with selected earnings and dividend data. For simplicity, balances for non-controlling interests have been left out of income and shareholders'
> Following is the stockholders' equity of Dennis Corporation at December 31, 2018. The following transactions, among others, occurred during 201 9. Jan. 15 Issued 1,000 shares of preferred stock for $62 cash per share. Jan. 20 Issued 4,000 shares of commo
> The stockholders' equity of Verrecchia Company at December 31, 2018 follows. During 2019, the following transactions occurred. Jan. 5 Issued 10,000 shares of common stock for $ 12 cash per share. Jan. 18 Purchased 4,000 shares of common stock for the tre
> The stockholders' equity of Sougiannis Company at December 31, 2018, follows. The following transactions, among others, occurred during 20 I 9. Jan. 12 Announced a 3-for-l common stock split, reducing the par value of the common stock to $5 per share. Th
> The stockholders' equity section of Gupta Company at December 31, 2018, follows. During 2019, the following transactions occurred: Jan. 10 Issued 28,000 shares of common stock for $ 17 cash per share. Jan. 23 Purchased 8,000 shares of common stock for th
> Macy's, Inc., reported the following in its 2017 annual report: On December 22, 2017, H.R. 1 was enacted into law. This new tax legislation, among other things, reduced the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. In app
> Carter Inc. began operations in 2019. The company reported $130,000 of depreciation expense on its 2019 income statement and $128,000 in 2020. Carter Inc. deducted $ 140,000 for depreciation on its tax return in 2019 and $122,000 in 2020. The company rep
> What is the definition of cash equivalents? Give three examples of cash equivalents.
> Lynch Company began operations in 2019. The company reported $24,000 of depreciation expense on its income statement in 2019 and $26,000 in 2020. On its tax returns, Lynch deducted $32,000 for depreciation in 2019 and $37,000 in 2020. The 2020 tax return
> Deere & Company reports the following tax information in its fiscal 2018 financial report. The provision for income taxes by taxing jurisdiction and by significant component consisted of the following in millions of dollars: REQUIRED a. What amount o
> Hoopes Corporation 's December 31, 2019, I 0-K report has the following disclosures related to its retirement plans. The following table provides a reconciliation of the changes in the pension plans' benefit obligations and fair value of assets over the
> Cisco Systems, Inc., reports the following in the Commitments and Contingencies note to their 10-K for the year ended July 2018. Purchase Commitments with Contract Manufacturers and Suppliers We purchase components from a variety of suppliers and use se
> American Airlines Group, Inc., provides the following disclosures in the notes to their 2018 financial statements (excerpted for brevity): Note 1: Basis of Presentation and Summary of Significant Accounting Policies ASU 2016-02: Leases (Topic 842) (the N
> United Continental Holdings, Inc., did not adopt the new lease standard in 2018 but provides the following disclosure its 2018 10-K report($ millions). The adoption of the New Lease Standard primarily resulted in the recording of assets and obligations o
> BP operates off-shore oil drilling platforms including rigs in the Gulf of Mexico. In April 2010, explosions and a fire on the Deepwater Horizon rig led to the death of 11 crew members and a 200-million-gallon oil spill in the Gulf of Mexico. BP's 2010 a
> On December 31, 2018, Watts Corporation borrowed $950,000 on an 8%, 5-year mortgage note payable. The note is to be repaid with equal quarterly installments, beginning March 31, 20 19. REQUIRED a. Compute the amount of the quarterly installment payment.
> On December 3 l, 2018, Wasley Corporation borrowed $500,000 on a 10%, I 0-year mortgage note payable. The note is to be repaid with equal semiannual installments, beginning June 30, 2019. REQUIRED a. Compute the amount of the semiannual installment payme
> On April 30, 2019, Cheng, Inc., issued $250,000 of 6%, 15-year bonds for $206,770, yielding an effective interest rate of 8%. Semiannual interest is payable on October 31 and April 30 each year. The firm uses the effective interest method to amortize the
> On December 31, 2018, Kasznik, Inc., issued $720,000 of 11 %, I 0-year bonds for $678,708, yielding an effective interest rate of 12%. Semiannual interest is payable on June 30 and December 31 each year. The firm uses the effective interest method to amo
> Petroni, Inc., which closes its books on December 31, is authorized to issue $800,000 of 9%, 20 year bonds dated March I, 2019, with interest payments on September I and March I. REQUIRED Assuming that the bonds were sold at 100 plus accrued interest on
> CVS Health Corp. discloses the following footnote in its 10-K relating to its debt: Following is a summary of the Company's borrowings as reported in note 5 to the firm's 10-K / / CVS also discloses that its interest expense was $ 1.04 billion in 2017,
> Eskew, Inc., which closes its books on December 3 1, is authorized to issue $500,000 of 9%, 15- year bonds dated May I, 2018, with interest payments on November I and May I. REQUIRED Assuming that the bonds were sold at I 00 plus accrued interest on Octo
> The f0llowing information was extracted from the 10-K reports for the years ended in 2018 for Hewlett-Packard Enterprise and Cisco Systems, Inc. REQUIRED a. Compute the amount of warranty costs incurred in 2018 for each company. (That is, what amount was
> Note B from the fiscal 2010 I 0-K report of Williams-Sonoma, Inc., (February 3, 2019) follows. Its cash flow statement reported that the company made capital expenditures of $190. !02.000 during fiscal 2018, impaired assets of $9.639.000 and recorded dep
> The 2018and2017 income statements and balance sheets (asset section only) for Target Corporation follow, along with its footnote describing Target's accounting for property and equipment. Target's cash flow statement for fiscal 20 I 8 reported capital ex
> Aglent Technologies, Inc., the high-tech spin-off from Hewlett-Packard Company, reports the following operating profit for 2018 in its 10-K ($ millions): REQUIRED a. What percentage of its total net revenue is Agilent spending on research and development
> The following information was provided in the 2018 10-K of Hilton Worldwide Holdings, Inc. Note 7: Property and Equipment (S millions) Note 7 also revealed that depreciation expense on property and equipment totaled $54 million in 2018. The cash flow sta
> What four different types of adjustments are frequently necessary at the close of an accounting period? Give examples of each type.
> Refer to Exercise EA-5. How much interest will Robert Smith pay as part of his first monthly payment?
> Take-Two Interactive Software, Inc. (TTWO) is a developer, marketer, publisher, and distributor of video game software and content to be played on a variety of platforms. There is an increasing demand for the ability to play these games in an on line env
> In its income statement for the first quarter of fiscal year 2018, The Gap, Inc., reported net sales of $3,783 million and cost of goods sold and occupancy expenses of $2,356 million, resulting in a gross profit of $1,427 million. In its footnotes, The G
> Mattel, Inc. designs, manufactures, and markets a broad variety of toy products worldwide which are sold to its customers and directly to consumers. The company's brands include American Girl, Fisher-Price, Hot Wheels, and Barbie. The following informati
